January 26, 2023
In proceedings brought by Novartis AG for injunctive relief to prevent the sale by Teva UK Ltd (and other defendants) of the generic drug fingolimod to treat relapsing-remitting multiple sclerosis, Teva counterclaimed for an Arrow declaration that its proposed acts of importing and selling the generic drug was obvious at the priority date of the European patent owned by Novartis AG (the Patent), the basis of Novartis’ infringement claim and under which Novartis has been selling its branded product Gilenya in the UK since 2011.
The Patent was the second divisional patent application following Novartis’ parent application. It was judged permissible to proceed to registration by the EPO in February 2022.
Mr Justice Roth refused to grant Novartis the injunction relief it sought. Novartis therefore de-designated the UK from the Patent so that it would not proceed to grant in the UK. Novartis also removed the UK designation from a third divisional patent application that had been sought for the same family. The next day, Novartis applied to discontinue its infringement action against Teva and the other defendants.
The effect was that when the Patent was eventually granted by the EPO on 12 October 2022, it did not apply in the UK and the UK became a generic market. Novartis subsequently either settled or reached agreement in principle with all the defendants to its infringement action, except Teva.
Despite Novartis’s application to discontinue its the infringement claim against Teva, Teva maintained its separate claim for an Arrow declaration, on the basis that it would continue to serve a useful purpose. The trial on the application for an Arrow declaration proceeded on the assumption that the relevant claim in the Patent was obvious, with the question of obviousness to be decided at a subsequent hearing. The sole issue for this hearing was therefore whether, as a matter of discretion, the court should grant the Arrow declaration sought by Teva.
On the question of whether the declaration was sought in the context of a dispute concerning UK legal rights, Teva contended that there was residual uncertainty on the UK market, that an Arrow declaration would dispel. Given that Novartis was disputing the declaration, Mr Justice Bacon found that there was indeed a real dispute between the parties in the UK.
Further, Bacon J inferred that in the absence of an explanation from Novartis as to why it had de-designated the UK after these proceedings had commenced but before trial, Novartis was attempting to shield its portfolio from the risk of an adverse High Court decision. That did not mean, however, that a declaration should inevitably be granted.
Bacon J found that Novartis’ aggressive enforcement of the Patent, including the fact that it had sought injunctive relief in the UK and then abandoned the UK designation months before trial, was not a stand-alone reason to grant the declaration. Nowhere in case law is it suggested that, without showing that a declaration would serve a “useful purpose”, a court might nevertheless grant a declaration to censure a defendant’s conduct and discourage such conduct in the future. Novartis’ conduct therefore had to be considered as part of the other factors relied upon by Teva.
Bacon J also rejected Teva’s claim that a declaration would provide clarity that its generic product was obvious to its customer, the NHS, because there was no evidence of confusion on the part of the NHS. There was also no evidence that anyone was confused by the undertakings that Novartis had given, as Teva claimed, and following an amendment made by Novartis, Bacon J judged that they were no longer ambiguous or lacked clarity.
As for Teva’s argument that a declaration would serve a “useful purpose” because of the potential utility of a UK judgment to a decision in Germany on whether to grant a preliminary injunction against Teva, Bacon J said that case law consistently establishes that if the only or predominant purpose of the declaration sought is to use the judgment for a foreign court, the English court must look carefully at the justification for the declaration. In such a case, a declaration is only likely to be granted where there is a very compelling justification for doing so.
Teva’s “compelling justification” argument was the disruption to its supply chain that not having a declaration would cause. It said that the effect of the declaration would be felt in the UK because Teva’s supply chain to the UK involves transit through Country A. If Teva were to be injuncted in that country, it said that it would be time-consuming and expensive to alter its supply chain. Teva would therefore seek to rely on the English court’s declaration in resisting any injunction in Country A.
Novartis said that Teva should already have taken steps to identify and plan for an alternative supply route in the event of an injunction being granted in Country A. However, Bacon J observed, Novartis could not identify a country through which Teva would be able to plan an alternative supply route, safe in the knowledge that there was no risk of infringement and that it would not be injuncted. The reality was, Bacon J said, that Novartis was seeking to enforce the Patent right across EPC contracting states. If Teva was required to find an alternative supply route due to proceedings in Country A, the availability of any such route would depend on the status of proceedings in the other countries. It was self-evident that this was likely to put Teva to considerable time and expense.
However, Bacon J did not think that that was enough. Given the prevalence of global supply chains, it was not surprising that the decision of a foreign court on whether to injunct a product was likely to have a knock-on impact on the supply of that product to the UK. Further, the fact that a decision in Country A would affect the UK market indirectly did not change the fact that the purpose of an Arrow declaration in this jurisdiction would be to use it in the courts of Country A and other countries, rather than to obtain or enforce any right in the UK.
Overall, Bacon J found that there were no unusual circumstances which provided a compelling justification for the grant of the declaration sought by Teva. There was nothing unusual in the fact of a global supply chain with the result that a decision in one country might impact upon the supply of product to another, specifically the UK. Nor did Novartis’ conduct tip the balance in favour of granting a declaration in circumstances where it could not be said that this conduct had resulted in any continuing uncertainty on the UK market. Accordingly, the application was dismissed. (Novartis v Teva UK Ltd  EWHC 2779 (Ch) (19 October 2022) — to read the judgment in full, click here).